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Innovation is a key component in the success of a business. It helps to keep the workforce motivated, it drives research and development (R&D) and can give a company a huge competitive advantage. It also means it can grow, building more bases, taking on more sites and employing more staff, which in turn offers a must needed boost to the local and national economy.
But why is economic growth actually so important? And where does innovation currently fit into Ireland’s economy? Here we take a look.
Economic growth is measured by Gross Domestic Product (GDP), which is about the correlation between how much a country ‘earns’ and how much it ‘spends’. An increase in a country’s national output and expenditure signifies a healthy, growing economy. It brings about better living standards, more disposable income in peoples’ pockets (at least in theory) and more money to pay for services like education, pensions and healthcare.
Economic growth also means lower inflation, so people can buy more products and services with the money they earn. They can then spend more, and again enjoy a higher standard of living. Unemployment is also lower in a growing economy, thanks to expanding companies creating more jobs.
Business is changing and all sectors in all industries must keep pace with the one thing all of us consume - technology.
Technology has had a massive impact on our lives over the last two decades, affecting the way we bank, shop, work and communicate. Where it was once considered gimmicky, or the latest geeky fad, companies are increasingly now seeing the use of technology as integral to a company’s - and the economy’s - success. The challenge however is in keeping up with the pace of technological change, and embracing the advantages it will bring. Recognising the value of innovation, particularly in technology and science, and capitalising on opportunities offered will mean that Ireland’s economy continues to thrive.
Ireland is well known for being a forward-thinking, innovative place to do business, and has come a very long way in the last four decades. Even forty years ago, there were parts of Ireland that unbelievably still hadn’t been electrified but it’s down to its eagerness to progress that this is no longer the case.
The country recognises however that innovation and growth are constant, and like technology it’s impossible to stand still. Although Ireland has taken some important steps in recent years, not least in devising its Innovation 2020 strategy, there’s more work still to be done. This includes maintaining a healthy R&D spend on technology and manufacturing companies, and continuing to attract the mostly highly skilled talent.
Just like nurturing a perfect garden, growing a strong, healthy economy means developing the right ecosystem. All the conditions need to be balanced, and shrewd investments in time and money need to be made.
Ireland already enjoys the benefits of a skilled, creative, relatively young workforce and continuing this is essential. A favourable taxation system as well as social and political stability make the country an attractive place to work and bring up a family. The country has the ability to continue attracting large international corporations, with its supportive government and high class academia. But resting on its laurels is not an option, and guarding against any damage to this economic ecosystem is of paramount importance.
Although Ireland is obviously remaining in the European Union, Brexit could still have as yet unseen ramifications for the country as its closest neighbour. Although Boris Johnson’s government has ironed out a fair amount of the uncertainty, there is still much negotiation to do.
The UK’s departure from the EU is still an unknown entity. It’s an unprecedented move which undoubtedly will have far reaching and previous unconsidered effects. Whether Brexit has a notable influence on Ireland’s economy in the long term or not remains to be seen, but uncertainty in any form can be a challenge.
While Ireland is particularly entrepreneurial in comparison to many other EU countries, it’s not always been easy to encourage small, local companies to scale up rapidly. Although this isn’t a unique problem specific to Ireland, it is still worth changing. After all, Ireland’s ‘business model’ is very dependent on FDI, which doesn’t always work well with European tax harmonisation. If multinational firms reduce their investment in the country for any reason at all, the economy will likely struggle.
Maintaining a highly skilled labour force going forward is another challenge. Ireland has for many years been an incredibly popular country to live and work, and it’s anticipated that by remaining an EU member this will continue. Many companies have chosen to base themselves here, and that means our universities and other educational establishments need to keep turning out highly skilled employees that such a knowledge-based economy needs.
The final challenge to consider is the fact that information technology is still not an essential subject for pupils to study at secondary school. Where previously the wealth-creating industries for Ireland were oil and gas, technology now very much has its hat in the ring too. But without IT being taught in secondary schools, there’s a danger that - even with excellent teachers - Ireland’s future workforce could end up behind the curve.
Is your Ireland-based company looking to grow? Perhaps you wish to invest in R&D but are concerned about the costs?
The good news is that the Revenue offers some excellent tax incentives to innovate, and they’re open to any business in any sector. Known as R&D Tax Credits they can seriously help towards the expenditure involved - and we deal solely with applications day in day out. Our specialist R&D tax relief team are exceptionally knowledgeable and can help you with all aspects of making a fully optimised claim.